Appraisal Review & Management: Independent Judgment and Scope
Appraisal Review & Management tests the reviewer’s independent judgment and the manager’s control of engagement quality. The exam distinguishes review from appraisal, tests scope-of-work decisions, and checks whether the reviewer documents reasoning rather than simply substituting a different number.
Core rules
- Review types: administrative review checks completeness and compliance; technical review tests data, methodology, and reasoning; compliance review tests standards and engagement terms.
- Reviewer competence and independence: the reviewer must be competent for the property type and free of conflicts. A reviewer who develops their own value must disclose that the scope includes valuation.
- Scope of work: define the review question, the standards applied, the evidence examined, and whether the reviewer will concur, concur with modification, or dissent.
- Documentation: record the workfile, the review notes, the assumptions accepted or rejected, and the basis for any conclusion.
- Management: engagement letters, confidentiality, record retention, quality control, and peer review are part of the domain. Independence and ethics are not optional.
Worked example
A review finds a DCF using after-tax WACC of 10% but pre-tax cash flow of $1.0 million. With a 25% tax rate, the correct after-tax cash flow is $750,000, giving $7.5 million at a 10% perpetuity, not $10 million. The reviewer should document the inconsistency, state that the original value is unsupported, and either correct it within the review scope or recommend revision. The reviewer should not silently substitute $7.5 million without disclosing that the scope included developing a value.
Traps that cost marks
- Substituting a personal opinion of value without a scope that permits it.
- Reviewing only arithmetic while ignoring methodology and assumptions.
- Failing to document the review trail and the basis for dissent.
- Accepting unsupported management projections without challenge.
- Breaching confidentiality or independence in engagement management.